This edition of OECD's periodic review of Italy's economy finds a welcome economic recovery under way with improvements in export and labour market performance. But medium-term prospects remain challenging: total factor productivity shows little signs of resurgence, highpublic indebtedness threatens fiscal sustainability and population ageing looms large. Without further reforms to restore economic dynamism, living standards will be dragged down relative to other countries. This survey discusses policies undertaken by the government to address these challenges, notably to boost competition in public markets, achieve fiscal sustainability, and make fiscal federation work - all in support of growth and adjustment.